Germany’s Solar Industry Going Dark

April 12, 2012 Updated: April 13, 2012

MUNICH—Last week, another major German solar company has pulled its plug, as Q-Cells has filed for bankruptcy, announcing that it will shut down its operations mainly due to an inability to compete with Asian rivals.

This puts the German solar industry on death’s throes, as this is another bankruptcy out of many for a major German solar company in the last few months. Last month, Freiburg-based Scheuten Solar, which was the biggest producer of solar modules eight years ago, also filed for bankruptcy.

That is in addition to already “just bankrupted” Berlin-based Solon, Erlangen-based Solar Millenium—which had projects extending to California’s Mojave desert—Frankfurt’s Odersun, as well as Solarhybrid. All of these are major players in the German solar industry.

The string of bankruptcies have happened at the same time as the German government’s recent subsidies cut for solar energy, on which these companies were so reliant. Analysts say that overreliance on government subsidies caused mismanagement and these companies have failed to develop competitive business plans, rigorous execution, and were not able to compete with Asian rivals, especially those from China.

It was a similar story with Eastern Germany’s industrial plants before the reunification, due to its reliance on “subsidies” of the communist government at that time. East German industries were completely uncompetitive when the wall opened to the West. All the East German production had disappeared since, which is a lesson learned from mismanagement based on overreliance on social subsidies.

At the same time, a big blow was sustained by the German solar industry when Chinese manufacturers were able to copy the solar technology and sell them at 30 to 40 percent cheaper. The costs of solar production in Germany are very high, due to high labor and material costs, high taxes, complex administrative system, and of course, very little sun.

Bulgaria a Better Option

Although many would think that China would be an ideal place to produce solar panels because of its economic advantages, this is not the case anymore.

Actually, since recently some Chinese companies are moving their production to Bulgaria. At the moment, prices in China for production have risen and one also has to consider an unstable political climate in the Communist Party, mainly triggered by ousting of former Politburo member Bo Xilai last month that has made many investors nervous.

Bulgaria, one of the latest EU entrants, at the moment offers better and cheaper conditions for solar production than China. With its sunny and very hot summers, a 10 percent flat corporate tax, loose administration, and the cheapest workforce in the EU, many companies are already looking at Bulgaria as a future investment.

Last week, SunEdison, IFC, OPIC, and Unicredit have been given permission to build a solar power plant in Bulgaria. It is a 155 million euro ($201 million) project, aiming at creating 60.4MWp solar power—the equivalent of lighting up 27,000 homes in its first year of operation.

“IFC’s support for renewable energy is an important part of our work to address climate change. This is our second renewable energy investment in Bulgaria, following the financing of the St. Nikola wind farm in 2008. The investment in Karadzhalovo is our largest single solar financing to date,” said Tomasz Telma who is director for Europe and Central Asia at IFC, in a statement.

This project is an addition to an array of smaller solar projects already taking place in Bulgaria. Schneider Electric SA (France) just won a contract to build two solar parks. Premier Power, P2 Solar(USA), IEC (Israel), ABB (Switzerland) and Upsolar (China) are among many solar projects going on under way in Bulgaria.